Cambodia held a ground-breaking ceremony on May 4 for the first phase of construction of a long-planned refinery that will be located on 385 hectares (3.85 square km) in Kampot and Preah Sihanouk provinces.

China’s Great Wall International Engineering, an arm of state-owned China National Petroleum Corp. (CNPC), has been contracted to build phase one, which will cost some US$620 million and have a capacity to process 2 million tonnes of crude (40,000 bpd) when it comes into operation in 2019.

A second phase for the refinery is meant to boost capacity to 5 million tpy (100,000 bpd) and is planned to come on stream in 2022. A third phase could be added after that. The current cost for the two-phase project is estimated at around US$1.6 billion.

Cambodia Petrochemical Co. (CPC) will operate the refinery. China Perfect Machinery Industry (Sinomach) is its joint venture partner. Together the two companies intend to establish 300 retail stations throughout Cambodia to serve the domestic market. Some US$300 million will be invested in building the retail network.

The country’s refinery plans are aimed at reducing a 100% dependence on imported products. Crude feedstock for the refinery will be supplied from the Middle East, but Cambodia is hoping to develop its own offshore oil resources over the next few years.

Singapore’s KrisEnergy is in the process of finalising a revenue-sharing agreement with the government that will enable work to start in Cambodia’s Block A in the Gulf of Thailand. It is estimated that Block A could be brought on stream in two years once the agreement is finalised.Cambodia’s demand for products is growing. In 2015, it used 1.8 million tonnes, which could be covered by phase one production. It intends for phase two to allow the export of up to 3 million tpy of products.

While Cambodian officials have expressed their hope that domestically produced products will reduce retail prices, Cambodia’s Phnom Penh Post quoted Danish energy expert and CEO of Go4 Bunker Cambodia Tommy Christensen, who was attending the ground-breaking ceremony, as saying the new refinery might find it difficult to turn a profit as long as it relied on foreign crude oil imports. But he added that once Block A was producing crude the situation could turn around and put Cambodia on the global energy trade map.